Surfactants Business Prospects

The following public companies report (in their annual reports) that they produce surfactants: AKZO Nobel; BASF; DowDupont; Clariant; CRODA; Evonik; Henkel; Huntsman; KAO; and Stepan.  Of these companies, only one, Stepan, reports any financial data on their surfactants business.  For Stepan, surfactants is a separate, reportable segment.

Surfactants sales account for about 70% of Stepan’s sales.  These sales decreased $24.3 million from 2015 to 2016, a 2% change.  Gross profit margin percentages (GPM%) increased by 1% from 2015 to 2016, but was only 17% in 2016, not a particularly good GPM% for a chemical company.  Surfactant operating income in 2016 was 8% of sales and 9% in 2015.  These surfactant business results do not seem to me to reflect a strong, robust business.  And the Stepan results could reflect the surfactant business results for other companies that produced surfactants.

Countering what appears to be a recent lackadaisical surfactant business performance is the introduction of biobased surfactant products.   Of the ten public companies mentioned above, at least four of them write about biobased surfactants in their annual reports (Clariant; CRODA; Evonik; and Henkel).   CRODA has recently commissioned a manufacturing facility in the United States producing 100% biobased surfactants.

Targeting biobased surfactants could be an excellent example of good supply/value chain management.  The purchasers of these company surfactants, (retailers of detergents, soaps, and other products containing surfactants) are likely assessing their customers and are concluding that detergents, soaps, and other consumer products containing biobased surfactants are growing in demand.   A 2011 Genencor consumer survey found that more than 50% of consumers in the United States and Canada are likely to buy biobased products and more than 60% are confident that biobased products are better for the environment (click here to find more details on this survey).  A more recent, 2017 European-centered report examines trends in biobased products in several industrial sectors and found that in the personal and home care sector (i.e., soaps and detergnets) the market is especially receptive to biobased, environmentally friendly products (click here to read this report-PDF file).  Increasing demand for differentiated products usually leads to higher profitability.